SINGAPORE (Aug 10): OCBC is ceasing coverage of QAF as the group redistributes its internal resources amid rising competition, currency volatility and costs.

Better known as the maker of Gardenia bread, QAF’s business can be divided into four major segments, namely bakery, primary production, trading & logistics and investments & others.

In 2Q17, QAF reported a weaker set of results. Revenue was up 1% to $209.8 million but PATMI tumbled 72% to $8.06 million compared to $28.8 million in 2Q16 which included an exceptional gain of $9.7 million.

<hr/><a href="https://www.theedgesingapore.com/qaf-reports-72-fall-2q17-earnings-81-mil">See: QAF reports 72% fall in 2Q17 earnings to $8.1 mil</a><hr/>

Across all the group’s segments, EBIT decreased due to higher distribution and A&P expenses for Bakery while Primary Productions saw lower prices and weaker profit margins.

Due to the deconsolidation of GBKL results and excluding the one-off gain in 1H16, the group’s 1H17 revenue was down 8% while PATMI also dropped 37% to $22.3 million.

See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='/capital/brokers-calls/uob-kay-hian-lowers-mpacts-tp-dpu-lower-contributions-china-and-further?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>UOB Kay Hian lowers MPACT’s TP, DPU on lower contributions from China and further depreciation on forex</a>

In a Thursday report, analyst Jodie Foo recalls that the management has guided for potential cost pressures this year, particularly for the Primary Production segment as the group expects performance to be affected by competition, currency volatility and higher raw material costs, energy and distribution costs as well as other operating costs.

Despite higher volume, general oversupply left significant pressure on prices and margins, resulting in lower average selling prices. However, the group says it is currently seeing some signs of stability.

“All considered, the near term outlook looks challenging. Nonetheless, the group is also making meaningful expansion plans and strategic initiatives,” says Foo.

See also: <a class='gtm_see_also_2_inread' style='text-decoration: underline;' href='/capital/brokers-calls/uobkh-maintains-overweight-rating-s-reits-after-seeing-healthy-signs?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>UOBKH maintains 'overweight' rating on S-REITs after seeing 'healthy signs' that inflationary pressures have moderated</a>

The group earlier announced that it has decided to pursue a listing of the Primary Production business on the Australian Securities Exchange to increase its shareholder value and enhance the profile of its subsidiary, Rivalea, in its core market. However, there is no assurancce the proposed listing will materialise.

As at 11.36am, shares in QAF are trading 4 cents lower at $1.26.

OCBC ceases coverage on QAF on redistribution of internal resources

MSCI boss warns of climate risks

Keppel to acquire 50% stake in European asset manager Aermont Capital for up to $517 mil

Local banks 'resilient' in 2023, but MAS warns of deteriorating asset quality, climate transition risks

The new kings and queens of content

Singapore’s headline and core inflation figures increase to 4.7% and 3.3% in October

UOB Kay Hian lowers MPACT’s TP, DPU on lower contributions from China and further depreciation on forex

OCBC ceases coverage on QAF on redistribution of internal resources

Related News

Highlights

MSCI boss warns of climate risks

Related News

OCBC sues money laundering suspect for $19.7 mil

OCBC remains RHB’s top pick after 3QFY2023 results

OCBC appoints Wang Ke as CEO of Hong Kong office